Eureka Forbes is a strong compounding opportunity, Nuvama says; Check price target

Shares of Eureka Forbes will be in focus on Wednesday, September 17, after brokerage firm Nuvama Institutional Equities initiated coverage on the company.

Nuvama has begun coverage with a 'Buy' rating and a price target of ₹700, implying a potential upside of nearly 21% from Tuesday's closing level.

The brokerage wrote in its note that Eureka Forbes is India's largest electric water purifier company, holding a 40-45% share of the ₹4,900 crore organised market.

As the only large full-stack player in an underpenetrated market (6%), Eureka Forbes is strengthening its "purity of trust" proposition through innovative product launches, revitalised advertising and promotions, omni-channel reach, and a revamped after-sales service business, which contributes about 33% of its revenue.

Nuvama projects a 14% revenue CAGR for FY25-28E, along with a more robust EBITDA and PAT CAGR of 24% and 31%, respectively. This is expected to be supported by a strong 300 basis point operating leverage, following a 530 basis point gain over FY23-25, driven by cost optimisation.

The brokerage, however, cautioned that delays or weaker-than-expected results from the after-sales service revamp and heightened competition pose key risks.

Earlier this month, Emkay Global also initiated coverage on the stock, with a 'Buy' rating, and a price target of ₹725.

Under new management, Eureka Forbes is transforming its product and service portfolio while unlocking growth in underpenetrated categories such as water purifiers and vacuum cleaners, where it holds dominant market shares. The company is also entering adjacent categories, the brokerage said.

Out of the 10 analysts covering Eureka Forbes, nine have a 'Buy' rating, while one has a 'Hold' recommendation.

On Tuesday, shares of Eureka Forbes settled 3.66% higher at ₹580.90. The stock remains flat on a year-to-date basis.